Angela Merkel, Germany’s chancellor (Photographer: Krisztian Bocsi/Bloomberg)

As Merkel Retreats, Europe Shows It Still Needs Her Firefighting

(Bloomberg) -- Angela Merkel is starting her retreat at home just as she’s needed more than ever by her allies abroad.

As Europe prepares for life without the leader whose clout underwrote its global standing and solutions to its crises over the past decade, the continent faces another challenging few months with the German chancellor’s legacy as the euro region’s rock in the balance.

As Merkel Retreats, Europe Shows It Still Needs Her Firefighting

Italy’s financial stability is in question, Britain is due to leave the European Union in March and populist parties are conspiring to reshape the continent’s politics in EU elections weeks later. There’s also the test of unity over sanctions against Vladimir Putin’s Russia and keeping peace in the Balkans -- all with Merkel now at her weakest.

The 64-year-old’s remarkable longevity had to run out of road at some point. Her enemies were made, political capital spent and she was hobbled by a refugee crisis that caused a nationalist backlash in Germany.

But it comes at a critical time as the balance of power tips further toward the kind of nationalist protectionism espoused by the U.S. under Donald Trump and away from Merkel’s vision that left her as the beacon for liberal democracy among supporters. The baton is now being passed to French President Emmanuel Macron and the pressure will be on him to emulate Merkel’s ability to weigh Europe’s needs while sustaining ties with Russia, Turkey and China.

As Merkel Retreats, Europe Shows It Still Needs Her Firefighting

While Merkel announced she would relinquish leadership of her Christian Democrats and will step down as chancellor within three years, populist former army officer Jair Bolsonaro celebrated winning the presidency in Brazil.

“There’s no European leader who was as suited to this high-wire act as she was,” said Jan Techau, senior fellow at the German Marshall Fund in Berlin. “The question will be who has the unbelievable diplomatic skills that she has.”

Euro’s Glue

Merkel won four elections for her Christian Democrats over 13 years in office, including a resounding victory in 2013 as Germany’s dominance of Europe peaked during the continent’s debt crisis. She was pivotal to Greece agreeing to the terms of its bailouts and keeping the euro region together.

By 2017, she led the party to a historic low, her standing challenged by Trump’s rise to the U.S. presidency and retaliation against her open-door migration policy.

A far-right party entered Germany’s parliament for the first time since the immediate aftermath of World War II on her watch. An economic boom and Germany’s lowest unemployment in a generation failed to help her Christian Democrats at the ballot box.

As Merkel Retreats, Europe Shows It Still Needs Her Firefighting

Merkel says she intends to stay until the end of her term and focus on the global stage. Her leeway, though, will depend on who her party chooses as its next leader in December. Possible contenders include hard-liners on government spending and critics of her refugee policy, suggesting the party might complicate her efforts to foster European unity with Macron on such things as the budget.

“If there were still people in Paris or elsewhere hoping for an agreement on key European dossiers this year, like euro-zone reform or migration policy reform, they should forget about it,” said Janis Emmanouilidis, director of studies at the European Policy Centre in Brussels.

For Brexit, Merkel’s lame-duck status adds another element of uncertainty to the EU-U.K. divorce talks, though it’s unlikely to substantially change the immediate prospects of striking a deal, people familiar with the negotiations said.

Head High

Making a dignified exit was important to Merkel, who witnessed her political mentor Helmut Kohl go down to defeat after he insisted on seeking re-election in 1998 after 16 years in power, according to people familiar with her thinking.

As Merkel Retreats, Europe Shows It Still Needs Her Firefighting

Growing up in former communist East Germany, her career has taken her from the euphoria of the Berlin Wall’s opening in 1989 to the vitriol of anti-immigration protesters waving “Merkel must go” signs during last year’s election campaign.

Taking herself out of the firing line of domestic politics, including critics in her own party, may mark part of her legacy. Hours after her unexpected retreat as party leader, she met South African President Cyril Ramaphosa at the Berlin chancellery to discuss investment in Africa.

“This could be a good change for Merkel to refocus on playing an important role on the international stage,” said Jan Kallmorgen, head of Berlin Global Advisers, a political-risk consultancy. “Of course, other leaders realize that Merkel is weakened. But she still has enough international standing to face leaders like Putin and Trump.”

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